Definition
The size factor reflects the historical outperformance of small-cap stocks over large-caps, documented by Fama and French. Small companies are riskier but offer higher expected returns. The premium has been inconsistent in recent decades, leading some to question its persistence, though it remains a recognized factor.
Example
Small-cap indexes have historically outperformed large-cap over very long periods, though with higher volatility.
FAQ
What is Size Factor (Small-Cap Premium)?
The tendency for smaller companies to outperform larger ones over time.
Why is Size Factor (Small-Cap Premium) important?
Size Factor (Small-Cap Premium) helps investors evaluate investment strategies and make more informed decisions.